Mandatory Discloures
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Contracts
A contract is an agreement, between two or more parties , to do (or not do) a certain thing which the court will enforce. It does not have to be a twenty-page legal document; it could a verbal promise or even a movie ticket. To be enforced by a court, an agreement must be made according to the rules of contract law. There are four essential elements for a valid contract: capacity to contract, mutual consent, consideration, and a lawful purpose. In addition, certain contracts (especially real estate contracts) must be in writing and signed to be enforceable.
1. Capacity to contract.
To be a valid contract, a person must be at least 18 years old, and must also be legally competent According to the Civil Code, a person who is "entirely without understanding" cannot make a contract
2. Consideration .
Even when all parties who have the capacity to contract freely consent to an agreement, it isn't a valid contract unless it is supported by consideration. Consideration is something of value exchanged by the parties to the contract. A contract can not be a one-way street: each party must give something to the other in order to get something from the other.
3. Mutual Consent.
For a contract to be a binding obligation, all the parties must consent to its terms. This mutual consent is sometimes referred to as a meeting of the minds. It is achieved through offer and acceptance.
4. Lawful Purpose.
The purpose of a contract must be lawful when the contract is made. If one person promises to pay another for committing an illegal act, their contract is void and cannot be enforced by a court.
Purchase Agreement Contract
The general term for a contract between a buyer and seller of real property is a "purchase and sale agreement," or something similar. But in California these contracts are usually referred to as deposit receipts. In most transactions, the buyers put up an earnest money deposit at the same time they make an offer to purchase. The standard form used as a written offer also serves as the buyer's receipt for the deposit. If the seller decides to accept the offer, he or she signs the form, and it becomes the parties' contract. It is important to mention that the Residential Purchase Agreement and Joint Escrow Instructions ( C.A.R. RPA-CA) that is used in 99% of all real property transaction in California is a consumer protective contract as printed. Almost all of it's many contingencies are for the Buyer. As a Seller, your protection depends on your agent and his/her skills in reading, negotiating and making a counter offer suited to the needs of the seller. The money thought saved by discount and/or uninformed agents can be lost many times over in badly advised contract acceptance, or worse yet, costly legal action! Your real estate agent should know and advise you of the dozens of potential pitfalls in the contract form!
Elements of a Deposit Receipt
The deposit receipt (Residential Purchase Agreement and Joint Escrow Instructions) is a multi-functional form and contains:
- an offer to purchase real property,
- a completed contract when accepted and signed by the byer and seller,
- a receipt for the good faith earnest mone,.
- joint escrow instructions,
- the seller's agreement to pay listing broker's compensation,
- a mediation and arbitration agreement,
- a confirmation of the agency relationships, and
- an irrevocable assignment of compensation to brokers.
Rember to obtain a copy of all documents you sign.
Note: A Residential Purchase Agreement and Joint Escrow Instructions must be accompanied by an agency disclosure (Seller's Advisory) form at the time of signing the contract.
Sample Residential Purchase Agreement And Joint Escrow Instructions |
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